(Bloomberg) -- China’s long-term economic blueprint unveiled at the Third Plenum gave stock investors few new reasons to buy, with traders now awaiting the release of detailed guidelines in the coming weeks.
The readout, released late Thursday, hinted that Beijing will stay its course to pursue “high-quality development.” The vaguely-worded statement fell short of signaling that the top leadership is preparing major stimulus to boost demand or arrest the property slump.
Chinese stocks have been among the worst performers in Asia this year due to sluggish growth and weak consumer demand. The CSI 300 Index fell as much as 0.8% Friday before trimming the slide, while the Hang Seng China Enterprises Index slumped about 2%.
Here is what analysts are saying:
Kaanhari Singh, strategist at Barclays
- From a China cross-asset perspective, the Third Plenum has proved to largely be a non-event
- Without any firm and immediate read-through for markets, equity markets are likely to remain choppy caught between a rock and a hard place
- The looming threat of trade wars as we approach the US elections should keep risk premium for equities high, especially without a new fiscal boost
- This leaves equities in the same setup as the post February regime – onshore National Team purchases will keep a firm bid on stocks acting as stock stabilization
Pierre Lau, analyst at Citigroup
- From an equity strategy perspective we see the outcome reflecting high policy continuity from China’s leadership, with consistent status quo approaches
- Hence no big change in our sector and stock recommendations
- More details or action plans should become clearer next week with expected release of a follow-up document
- From a strategy standpoint, we maintain our preference for global-economy-driven sectors such as exporters and commodity names (especially gold) rather than domestic-oriented consumption or property names amid economic weakness which might persist in 2H24E
Wendy Liu, strategist at JPMorgan
- The 3rd Plenum Communique offered a balanced policy view in-line with JPM expectations and follow-up policy measures are likely to come from the Politburo meeting next week
- From the Communique, we identify digitalization as the tailwind for enterprise/taxation software, continued anti-corruption policies posing challenges to ostentatious consumption, support for innovation benefitting semi equipment and innovative drugs, and the new urbanization initiatives fortifying the governments’ need to acquire housing inventory
- From this point on, besides tracking new policy measures, we see the market trading interim results
James Wang, strategist at UBS
- The plenum highlighted long term objectives surrounding multifaceted reforms and high quality development
- More details would likely be disclosed in a full document in the next few days based on previous Plenums
- While the high level directions outlined in the communique were encouraging, investors likely need to see more details on the proposals and implementation before taking actions
- Nevertheless our recent discussions with investors suggest expectations leading into the plenum were fairly muted as investors in general expected a continuation of near term policy directions
Yang Tingwu, partner at Fujian Tongheng Investment
- The wording is pretty much in line with my expectations, though the tone is more mild than I anticipated
- What this tells us is that we are still adhering to the path of Deng Xiaoping — which is to stick to the market economy — and will not turn back to a planned economy
- The part about optimizing parts of the economy that are not performing refers to the property market, and it stresses the new productive forces
Gary Tan, portfolio manager at Allspring Intrinsic Emerging Markets Equity
- We see it as a signal that China will “stay the course” on its economic reform path
- We await the release of the full document of the Central committee Decision on reform and comments of the reform plan for more policy detail
Ken Cheung, chief Asian FX strategist at Mizuho Bank
- First impression is that the meeting shows emphasis on high quality of growth — which implies no expansionary policy to promote the quantity of growth
- The meeting also just touched upon the tasks of preventing and resolving property market risks, without mentioning any surprising measures to stabilize the housing market
Gary Ng, an economist at Natixis SA
- The communique does not offer any new substance from existing policy trajectory
- It means any hope on big stimulus is dashed once again, and there is no reversal in the market concern on economic growth
--With assistance from April Ma, Charlotte Yang, John Cheng and Tania Chen.
(Updates with voices from Mizuho Bank and Natixis.)
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